The Origins and Development of Policy Governance

Cover Story

International Policy Governance Association (IPGA)
board members, John Bohley and Caroline Oliver are surely not alone in
their curiosity about the evolution of Policy Governance and its
relationship to other streams of thought. Here John Carver, the creator
of Policy Governance, responds to their questions.

1. We understand that you were the executive director
of the Harris County Behavioral Health Authority in Texas when you
started working on the development of Policy Governance and had the
opportunity to develop it further when you became executive director of a
mental health clinic in Indiana. Can you tell us a bit more about the
circumstances that motivated you to start work on your own approach to
board governance?

The Harris County Commissioners, a five-member elected
group, acted as the board of directors of the Mental Health and Mental
Retardation Authority of Harris County. Political considerations
outweighed most other matters and taught me a lot about how boards
should not function. (Since then, an appointed board governs the new organization.) I discovered, however, that finding out how boards should
function was far more difficult. The literature was quite sparse,
conceptually fragmented, and not intellectually compelling. What I could
find was more a collection of tips specific to one or another type of
organization rather than a conceptual consideration of governance as a
whole.

The word governance was hardly known. This may
have been due to the widespread belief that board work was simply an
arm’s-length version of management and, in the case of many nonprofits,
that it was also about fundraising. The process of governance was seen
to be unlike management only in that a group carried it out, but of
course management also frequently worked in teams. So the need for
governance to have its own dedicated technology was not so apparent;
maybe it is not surprising that it also didn’t merit its own name.

A few years later, when I’d made a governance book
proposal to a publisher, the response was that a book dealing
specifically with boards was not needed. After all, I was told, there
were already books on management and more on the way. Since boards just
performed management at their level, a book on governance would be as
unnecessary as one on, say, managing as the head of accounting or as the
director of human resources.

At any rate, the beginnings of Policy Governance
occurred as the Houston job ended, and during the interim, without
employment to distract me for a few months, I was able to lay the
foundations of Policy Governance. At that time I was hired as executive
director of a mental health center in Indiana (then Quinco Consulting
Center, now a division of Centerstone), where the board agreed to be a
living laboratory of my emerging ideas. I owe quite a debt to that
board.

What motivated me was discomfort with what I saw as a
critically important function muddling along with no assistance from
theory to guide it in developing judicious practices. Board work was
conceptually ragged, a collection of bits and pieces that suffered from
lack of system. Many of the bits and pieces were individually pretty
wise, but to me, the situation cried out for conceptual organizing as
much as a sink of dirty dishes demands our attention.

2. Did you set out to develop a comprehensive model of board governance, or did that goal arise later in your creative process?

I set out to develop as thorough and instructive a
design for governance as I could. Although my direct work concerned
governance of a public mental health organization, it seemed early on
that any really meaningful concepts might have wider application. The
challenge at first, though, was not as ambitious as universality but of
achieving airtight logic for this one board. That was sufficient
motivation at the time. I repeatedly tested the emerging ideas and
naturally had to discard a number of them. The main test for principles
was whether each principle under consideration (for example, one board
voice, proscription of delegated means) would not only be applicable and
useful, but would be necessary in every governance circumstance I could
imagine. The main test for concepts, such as ownership and Ends, was
whether they uniquely filled gaps among components that would constitute
an integrated, internally consistent system.

I was not sure it would be as comprehensive or universal
in its applicability as it turned out. But I did intentionally use
thought experiment methods in order to chase what I then hoped would not
prove to be an elusive dream. I gathered others’ views mostly through
reading, but with regard to the actual conceptual development, I worked
best alone.

3. What do you see as having been your main influences in having the courage and vision to develop a new model of governance?

I recall three major influences. One was a conviction
that any important function can be improved by breaking it down into its
components, then analyzing them in terms of the total system and, in
the process, looking for improvements in the system itself. I see this
as being similar to the history of figuring out the submicroscopic world
in order to understand macroscopic matter and energy better.

Second, a lot of what I’d been studying about management
methods seemed not to have been applied to governance at all or, if
applied, seemed to end up duplicating what was already there, adding no
unique value. I found, of course, that some management methods could be
profitably applied and some could not. Finding out what caused the
difference engaged me in figuring out what differentiated management
from governance.

Third, I observed that boards either allowed their
executives to control the board job or allowed themselves to get into
executive jobs. This tendency for falling into the opposite dysfunctions
of inversion or invasion was even more peculiar because boards could do
both in the same meeting, suggesting a randomness enabled by a common
flaw rather than two distinct defects.

All three of those factors pointed me toward the missing
element: an encompassing theory or conceptual framework for the board
job of linking governance to some larger legitimacy base. What flows
along that channel? How can direct responsibility be distinguished from
accountability for authority passed on to others? How can proper
behavior as well as proper outcomes be ensured without hands-on board
involvement that risks cluttering the management process and burdening
creativity?

The problems were so compelling that I don’t remember
courage coming into it. I suppose there was a measure of audacity, for
it seemed to me then that my impudence would lead to either a
breakthrough or a career-damaging reputation for being misguided, if not
harebrained.

4. What do you see as having been your main
influences from the preexisting governance field in developing the
theory and practice of the model?

Many wise beliefs about board behavior and mechanisms
predated Policy Governance and, for that matter, continue to come out
now. It has long been said that boards should deal with policy and big
issues, think long term, mind their fiduciary responsibilities, and
avoid micromanagement and rubber stamping. Policy Governance absorbed
these wisdoms, though in most cases giving them more rigorous
definitions and weaving them into a previously nonexistent whole. The
greatest benefit of pursuing that wholeness is that it reveals further
weaknesses not obvious without it. That is somewhat similar to the way
new elements could be predicted once Mendeleev invented the periodic
table of known elements. Like a scientific theory, then, a holistic
conceptual model throws light on questions that may not have ever arisen
before.

5. What do you see as having been your main influences from other fields in developing the theory and practice of the model?

Management, scientific theory development, and to a
lesser extent political science significantly affected the beginnings of
my inquiry.

In particular, I was greatly influenced by management
insights about job description and delegation; these caused much
exploration about what a “job” really is and how, both vertically and
horizontally, different jobs should be linked together.

Also, my doctoral training in psychology and behavioral
research was influential, though not in the way you would think. Its
main effect was in engendering what became my obsession with assembling
ideas into a conceptual whole rather than pieces. That’s what is needed
in producing theory, and that is what I frequently refer to as
conceptual coherence.

The third influence was political science—not so much
with respect to governmental types or economic systems, but more as it
deals with the transmission of the authority of a mass of people to a
small group. The political science influence was what drew me into
agency theory, social contract theory, and servant-leadership.
Curiously, though, I was not sufficiently knowledgeable then to
recognize the rich literature on these topics, and I did not know even
to call these concepts by their rightful names.

6. How did Policy Governance get its name?

One option I considered was Values Governance. I
was convinced early on that governance should be built on the
recognition that governing by explicit values is more efficient and
capable of being more exhaustive than governing by the multitude of
decisions based on those values. (That’s not unlike parents instilling
values rather than dictating their children’s individual choices.)
However, figuring out which categories of values are governance relevant
presented a hurdle because even choosing which font to use is based on
values. So an early hurdle was to construct relevant value categories
and search for the principles that might apply differently to each. The
focus on organizational values was pertinent enough to justify Values
Governance as a descriptor.

But Values Governance as an appellation didn’t last,
largely because it would have saddled the newborn model with political
baggage. During those years, public education in the United States was
going through very public conflict about values education. I could
foresee eventual consulting work with school boards, so entangling the
model (and myself!) in so spirited a debate was a handicap I was loathe
to assume. While the values education controversy was certainly an issue
for boards, it was not an issue about boards.

One option I did not consider was Carver Model.
Although I am flattered that the eponymous moniker became as widespread
as it did, I neither used it myself nor encouraged others to. As to the
use of the word model, it won out against system, design,
and other candidates long forgotten, as well as just Policy Governance
without the added noun. So “model” stuck. My attraction to the word was
due to my having a strong personal connection to the scientific method,
theory building, and the conceptual precision the word model implies in
research. However, since the word doesn’t have that extreme level of
coherence to everyone, in retrospect I’m not sure I made a good choice.

The use of the word governance is rarely
questioned now, but it was not in common use when Policy Governance
began in the mid-1970s. I appropriated the word to refer specifically to
the board’s job rather than use a term like Policy Board Leadership or
lengthier designations. I would like to think I helped governing
technology in boards acquire a generic term of its own, governance, but frankly that development would likely have occurred anyway.

Needing a consistent name for the model I’d produced was
obvious, but relying on others to safeguard its meaning also became
obvious. Professional courtesy for name identification and proper
attribution proved too weak a protection, plus users would drift into
sacrificing the model’s systemic integrity. It was evident that Policy
Governance would soon mean whatever anyone wanted it to mean. So I
sought further protection by registering the term as a service mark
(comparable to trademark) in the United States. During the last decade,
registered service mark protection was acquired in Canada and the
European Union, as well as continuing in the United States.

Just to clear up a misconception about the service mark:
seeking legal protection of the term Policy Governance (with capital P
and G) was not done for pecuniary reasons; there has never been any
charge, royalty, or licensing for using Policy Governance. The reason is
to enable my control over just what is meant by Policy Governance. That
effort is by no means 100 percent effective, but it has undoubtedly
been helpful in preserving the model as a name-identified design for
precision in board leadership.

7. What do you see as being the core contributions of
the Policy Governance model to the history of board governance theory
and practice?

Unique contributions of Policy Governance include the
differentiation of what I decided to call Ends and means along with
their dissimilar treatment, cascading of decisions by breadth, a rigid
one-voice rule for expression of board authority, performance
measurement exclusively against prestated criteria, and the ownership
concept.

The core contribution, however, might be that governance
is a distinct function in the transfer between owners and operators
that is sufficiently unique and critical to be capable and deserving of
being conceived in universally applicable theory.

8. What are your expectations and hopes for the future of Policy Governance?

Although Policy Governance enables a massive improvement
in a rather disorderly and inadequately theorized function, it requires
far more precision and discipline than has been familiar. Its
paradigmatic shift from time-honored practices appears complicated only
because it brings counterintuitive new rules that must be followed
meticulously. Moreover, fulfilling group accountability and exercising
group authority do not come naturally; excellence in governance allows
no escape from that hurdle. Yet many, if not most, board members already
work in fields that require mastery of far more complexity and
scrupulous attention than does Policy Governance.

Governance in its present state does not exist in
isolation. It is surrounded by and immersed in power relationships and
interests that have grown up under the old methods, ones that naturally
resist even the most compelling of transformational ideas. CEOs who
control boards—and we know there are many ways of doing that—and board
members who dominate the process are likely to see changes in terms of
their current roles. Funders, accreditors, and other authorities have
moved little from governance ideas of decades ago. Laws and regulations
were not devised by those on the leading edge of the past, much less the
future. Political figures and the press speak of governance with little
attention to the care it deserves, thereby spreading poor ideas even
further.

I don’t recite these realities in order to make Policy
Governance or any equally coherent models that succeed it seem
impossible. I say these things in recognition of how challenging a task
it is to spread an enormous conceptual shift under obdurate conditions.
After all, keep in mind how long it took surgeons to start washing their
hands even though washing required neither new skills nor money.
Furthermore, there is no reason to expect advances of Policy Governance
to be a straight line with no setbacks along the way. Even physicians’
hand washing has come and gone (and, in fact, it is a problem in
hospitals even today). The future, as Alvin Toffler suggested in his
book Future Shock, invades the present at a staggered pace.1

The success of Policy Governance so far should be for us
a source of encouragement and excitement. The fact that Policy
Governance has advanced in the world as far as it has in only three
decades is far more remarkable than that it’s not yet ubiquitous
worldwide.

My hopes for Policy Governance are long run, and since
they are long run, they deal more with effective governance generally
than with Policy Governance specifically. My intent before developing
Policy Governance was that groups holding the trust of others optimally
govern the achievement and behavior of organizations that belong to
those others, whether in business, nongovernmental organizations,
government, or any other of the somewhat artificial categories into
which we divide life. That aspiration led to Policy Governance, but was
not replaced by Policy Governance. This is not to say that Policy
Governance isn’t the best existing resolution of that desire today; I
believe that it is. But no matter how well a tool is designed, the tool
should never outrank the vision it was meant to address.

“The reality is that corporate governance in hedge funds
… leaves much to be desired. According to a survey of 2,315 Cayman
domiciled funds carried out by Sound Fund Advisors in February, 31
percent of funds have no external directors. The most popular
‘professional’ directors sit on hundreds of boards, with the top 40
sitting on more than 100 each and the top three sitting on more than 500
apiece. How can they fulfill their fiduciary obligations on that
basis?”